SMEs Affected by Summer Late Payment Epidemic

A new research from Hitachi Capital Business Finance found that more than three in five SMEs (63%) are dealing with late payment issues – and the smallest businesses are those most at risk of dealing with non-payment.

With reports that 50,000 SMEs a year close their doors as a result of late payment – and with calls for legislation to protect Britain’s SME community – Hitachi Capital’s new research looked to quantify the seriousness of the payment epidemic across UK regions and sectors. A representative sample of 1,201 business decision makers were asked to report on the invoices they had sent customers and suppliers that were due for payment at the start of June 2018.

Who is most affected by late payment?

Smallest businesses on the edge

The old chestnut of the big firms paying small firms late appears to ring true and for small ventures it could be more than just a short-term cash flow issue. Hitachi’s research found that the smallest businesses (those with an annual turnover or less than £1 million) were those most at risk of serious non-payment. They were most likely to have invoices paid more than a month late (26%) and most likely to have bad debt risks from non-payment (25%). In total 20% of the UK’s smallest businesses said they were living with non-payment for 20% of their invoices.

Sectors most affected by late payment

The sector most affected by late payment was manufacturing, followed by small businesses in the legal sector – a sector where one might expect customers to pay on time. In contrast, decision makers in hospitality and agriculture reported the lowest levels of late payment.

Regional late payment hotspots

Regionally, small businesses in London were most affected by late payment (70%), followed by those in the South East (67%) and both the East and West Midlands (67% respectively). The urban heartlands of London and the North West were also the regions where small businesses were most likely to be facing non-payment issues (36% and 33% respectively).

Millennial entrepreneurs

In the digital age with a new generation of young people starting up their own businesses, the Hitachi Capital Business Finance research revealed that younger bosses were more likely to be experiencing payment issues. 70% of small business decision makers under the age of 35 reported late payment issues with some invoices (70%) compared to 61% of those aged 55 or over. A sign perhaps that despite advances in technology and immediate payments that the problem of late payment could in fact be getting worse.